In my editorial in the July edition of this newsletter I touched on the need for the federal government to focus its attention on the macro issues affecting superannuation post the election, having had the retirement savings discussion consumed by micro topics such as franking credit policy prior to 18 May.
When it comes to resetting the government’s agenda in this direction, one obvious initiative Assistant Minister for Superannuation, Financial Services and Financial Technology Jane Hume has to re-energise is the move to enshrine the objective or purpose of superannuation in legislation.
The recommendation to have the objective of superannuation passed into law was one of the recommendations made by the Financial System Inquiry (FSI) back in December 2014 and you may have noticed very little has been done about it.
It would be understandable to ask why, particularly when then-assistant treasurer Kelly O’Dwyer officially committed to the process back in March 2016.
The government has actually received a number of submissions on this subject, however, no consensus has ever been reached as to what the definition of the objective should encompass.
Originally the FSI came up with a starting position that defined the purpose of superannuation as being “to provide income in retirement to substitute or supplement the age pension”. This may have been a good way to kick off the process, but it has been widely acknowledged among all stakeholders in the superannuation industry that this was by far and away too inadequate a definition.
For example, only recently SuperConcepts technical services and education general manager Peter Burgess highlighted the need for the definition to include a more aspirational element. To that end, his organisation has begun a #Time2Enshrine campaign to bring the initiative back to the forefront of any superannuation discussions the government is conducting.
To be fair, this process is not an easy one and we should not be flippant about this fact. After all, as Burgess pointed out, the wording of the definition will be significant in determining the future tax concessions granted to individuals in order to achieve the said purpose. And we all know tax concessions associated with superannuation have forever been a contentious topic.
Nevertheless, Canberra must push ahead to have this issue resolved because if done properly, it would actually go a long way to achieving what everyone would like in the retirement savings system – less constant change and more consistency and stability.
How? Again if done properly, future governments will have to honour this definition and give it due consideration before any future changes to the system are made. Politicians would not be able to easily just use superannuation as a fiscal lever if there is a significant budget deficit to repair as we’ve seen in recent times.
Considering the process has previously stalled, it should be regarded as a positive sign a major player in the SMSF sector has decided to take the lead on this issue and hopefully we will see more support from other players so the need to address the situation can gain some momentum.
Jane Hume, this is where you could really make your mark and I’m sure the majority of superannuants across the country would like you to just get it done.